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Rate-Hike Fears Come Forward and Send Stocks Backward

Bonds are retreating as well after a strong NAPM index rekindled worries about a Fed rate increase.

After complaints about the dearth of news in the market lately, traders are getting their fill today with the release of some important economic data and a slew of merger-and-acquisition announcements.

The M&A items are nice and all, especially for those with sizable positions in the stock of a takeover target. But today the movements of the market are being dictated by the economic data, and those data have sent shivers through the inflation and higher-interest-rate fearful market.

The overall

National Association of Purchasing Management

index for May rose to 55.2 from 52.8 in April, while the prices paid index rose to 52.2 in May from 49.9 in April.

Stocks and bonds, which opened on the slushy side anyway, extended their weakness after the release of the NAPM report, which came in stronger than Wall Street's expectation of 53.4.

As for the Treasury market, it was getting crushed in the wake of the NAPM news and on some comments by

New York Fed

President

William McDonough

, who said it's unclear that the big hop in the April

Consumer Price Index

was a one-time event. The 30-year bond was lately down 1 9/32 to 90 16/32, yielding 5.93%. (For more on the fixed-income market, see today's early

Bond Focus.)

Meanwhile, the bond market has the pleasure of looking forward to Friday's slated release of the May

employment report

.

The rise in the long bond's yield has meant more bad news to big-cap stocks with high price-to-earnings multiples, which have suffered in part because of the bond's recent decline and the prospect of a

Federal Reserve

rate hike. The fed funds futures contract now is pricing in a 90% chance of a hike at the June 29-30

Federal Open Market Committee

meeting.

The

Nasdaq Composite Index

was down 40, or 1.6%, to 2431. Nasdaq heavyweights

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

,

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

,

Intel

(INTC) - Get Intel Corporation (INTC) Report

and

Dell

(DELL) - Get Dell Technologies Inc Class C Report

were all weaker.

Among tech-sector gauges, the

Philadelphia Stock Exchange Semiconductor Index

was off 0.5%. The

Morgan Stanley High-Tech 35

was down 1.7%, while the

Nasdaq 100

was down 1.8%.

In blue-chip land, the

Dow Jones Industrial Average

was down 112, or 1.1%, to 10,448. Reflecting a theme in the staggering market today, tech behemoth

IBM

(IBM) - Get International Business Machines (IBM) Report

(down 4 7/16 to 111 9/16) and investment banking giant

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

(down 4 15/16 to 134 3/8) were among the biggest drags on the Dow.

The

S&P 500

was off 16, or 1.3%, to 1286.

Bruce Bittles, market strategist at

J.C. Bradford

in Nashville, Tenn., said while the market's decline now is painful, he said he's looking for the market -- between now and the FOMC meeting -- to set itself up for a July/August rally. But for that rally to occur, the Fed has to hike interest rates.

Bittles said if the S&P 500 falls to the 1255-to-1265 area, that would be the area where a rate hike would be factored in.

Internet stocks, after climbing Friday, resumed their recent descent.

TheStreet.com Internet Sector

index was down 15, or 2.6%, to 566. Among the big losers in the index were

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

, which fell in the wake of a negative story in this week's

Barron's

, and

Yahoo!

(YHOO)

. The stocks were down 5.4% and 4.7%, respectively.

The

Russell 2000

was down 3, or 0.6%, to 436.

Along with a notable decline in tech and Internet stocks, financials were taking a beating. The

Philadelphia Stock Exchange/KBW Bank Index

was down 2.2%, while the

American Stock Exchange Broker/Dealer Index

was off a steep 4.6%.

Dan Marciano, head of trading at

First Albany

, pointed out around midmorning that there wasn't a lot of volume and said he thought a lot of people were still out for the long weekend.

"I don't think it breaks 10,000 again," he said of the Dow. He added that today's selling was not of the panic variety.

On the

New York Stock Exchange

, decliners were outpacing advancers 1,789 to 1,039 on 372 million shares. On the

Nasdaq Stock Market

TheStreet Recommends

, losers were beating winners 2,052 to 1,509 on 403 million shares.

On the NYSE, 26 issues had set new lows 52-week while 19 had touched new highs. On the Nasdaq, 51 issues had set new highs while new lows totaled 23.

On the Big Board,

America Online

(AOL)

was most active, with 8.1 million shares changing hands. It was down 3 3/4 to 115 1/2.

On the Nasdaq,

Dell

(DELL) - Get Dell Technologies Inc Class C Report

was most active, with 12.7 million shares changing hands. It was down 9/16 to 33 13/16.

Meanwhile, among other indices, the

Dow Jones Utility Average

was down 1.7%. The

American Stock Exchange Composite Index

was down 0.5%. The

Dow Jones Transportation Average

was up 0.9%.

Tuesday's Midday Movers

By Heather Moore
Staff Reporter

Merrill Lynch

(MER)

was falling -- just like its newly made Internet neighbors -- after

announcing plans to offer online trading in December with a basic charge of $29.95 a trade for U.S. equities. The stock recently was down 6, or 7.1%, to 78.

Meanwhile,

E*Trade

(EGRP)

was down 3 7/8, or 8.7%, to 40 5/8 after saying it will buy

Telebanc Financial

(TBFC)

in a stock deal valued at $1.8 billion. E*Trade will exchange 2.1 of its shares for each share of Telebanc. Telebanc was rising 10 1/16, or 15.2%, to 76 7/16. Today's session is E*Trade's first as a component of TheStreet.com Internet Sector index; it replaces

Excite

, whose acquisition by fellow index member

@Home

(ATHM) - Get Autohome, Inc. Sponsored ADR Class A Report

was completed Friday.

Elsewhere in Net news,

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

was down 6 7/16, or 5.4%, to 112 1/4 after a negative piece in

Barron's

detailed problems the company faces in making a profit and in dealing with competitors.

TheStreet.com's

James Cramer

gave his take on the issue this morning.

Amazon.com rival

Barnes & Noble

(BKS) - Get Barnes & Noble, Inc. Report

was down 1 1/16 to 27 1/8 on word the

Federal Trade Commission

will oppose the bookseller's plan to merge with

Ingram Book Group

, arguing the acquisition of the book wholesaler would violate antitrust laws.

barnesandnoble.com

(BNBN)

was down 3 1/4, or 14%, to 20.

In other news:

CheckFree Holdings

(CKFR)

was down 5 9/16, or 11.8%, to 41 1/2 after filing with regulators for a 3.5 million-share offering.

Complete Business Solutions

(CBSI)

was down 7 5/8, or 31.5%, to 16 5/8 after

SG Cowen

downgraded the stock to buy from strong buy. The firm also lowered its 1999 earnings estimate for the company to $1 a share from $1.20 and cut its 2000 view to $1.45 from $1.60. Cowen cited delays in the company's offshore projects and a transition in the offshore staff's skill base which could influence utilization rates.

Crompton & Knowles

(CNK) - Get Cinemark Holdings, Inc. Report

was up 1 1/4, or 6.8%, to 19 5/8 and

Witco

(WIT) - Get Wipro Limited Sponsored ADR Report

was up 5/16 to 17 13/16 after the specialty chemical companies said they are planning a merger of equals "aimed as much at cutting costs as at boosting revenues." The merged C&K Witco would be formed by swapping each Crompton & Knowles share for one C&K Witco share and each Witco share for 0.92 of a share of the new company.

First American

(FAM) - Get First Trust / Aberdeen Global Opportunity Income Fund Report

was up 3 3/16, or 7.8%, to 44 after

AmSouth Bancorp

(ASO)

agreed to acquire the company in a stock swap valued around $6.3 billion. First American shareholders will receive 1.87 AmSouth shares for each share held. AmSouth was down 3 13/16, or 13.4%, to 24 9/16.

Silknet Software

(SILK) - Get Silk Road Medical, Inc. Report

was up 3 1/8, or 8.4%, to 40 9/16 after

Credit Suisse First Boston

started coverage with a buy and a price target of 44 a share.

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

was down 2 3/4 to 57 after

Banc of America Securities

slashed it to hold from buy, saying a recent survey of corporate and public buyers "leads us to no other conclusion than that we'll see a significant computer hardware spending falloff in fourth-quarter 1999 and, to a lesser extent, the first quarter of 2000." The firm also dropped

Hewlett-Packard

(HWP)

, which lately was down 3 1/16 to 91 1/4, to hold from buy.